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Menendez says he called gov't agency to help donor

Senator Robert Menendez (D-NJ) speaks during a press conference on an agreement for principles on comprehensive immigration reform framework at the US Capitol in Washington, DC, on January 28, 2013.
SAUL LOEB/AFP/Getty Images

Sen. Robert Menendez, D-N.J., acknowledged Wednesday that his office contacted U.S. health agencies in a way that would help the biggest political donor to his re-election, the same eye doctor whose private jet Menendez used for two personal trips to the Dominican Republic.

The senator denied to The Associated Press that he sought to intervene improperly in billing disputes between the doctor and the government.

Menendez said he contacted the U.S. Centers for Medicare & Medicaid Services to ask about billing practices and policies. The contacts came during a dispute between CMS and Dr. Salomon Melgen, a longtime friend and campaign supporter of Menendez. The FBI searched Melgen's offices last week.

"The bottom line is, we raised concerns with CMS over policy and over ambiguities that are difficult for medical providers to understand and to seek a clarification," Menendez said.

The senator called federal health officials in 2009 and met with them again in 2012, each time urging them to change what he called an unfair payment policy that had cost his friend Melgen $8.9 million, according to an official close to the investigation who spoke on condition of anonymity because the person is not authorized to talk about ongoing investigations.

The official said Medicare held firm on the billing dispute and ordered the money repaid. It's unclear whether Melgen has repaid all or just some of the $8.9 million. He currently is appealing his case.

Medicare providers accused of fraudulent or improper billing are allowed to appeal their case, even after being fined or suspended from the program.

Melgen contends he didn't fraudulently bill the taxpayer-funded Medicare program but was confused about what was allowed, the official said.

Melgen treated patients suffering from macular degeneration with the costly drug Lucentis, which runs about $2,000 a vial. Melgen was only giving patients portions of the vial, which is allowed, but he was billing the government for the entire amount, the official said.

The drug has been the subject of controversy, and in a 2012 report from the Health and Human Services inspector general, the agency recommended that Medicare officials stop using the drug because there was a cheaper and equally effective alternative.

Menendez, who spoke during a roundtable Wednesday with reporters and others on Capitol Hill, subsequently told the AP he did not try to intervene with government regulators on Melgen's behalf. In a statement, the senator's spokeswoman, Tricia Enright, said Menendez "was never aware of and has not intervened in any Medicare fraud investigation on behalf of Vitreo Retinal Consultants," Melgen's company.

During the period that Menendez contacted federal officials in 2009 and 2012, Melgen was dealing with several financial setbacks. In 2008, the Internal Revenue Service filed a $6 million tax lien against Melgen's Palm Beach estate. Melgen satisfied that lien in 2011, but the IRS slapped a new $11.1 million tax lien on Melgen that same year. Melgen's home is assessed at $2.3 million.

Melgen also has filed a series of lawsuits in Florida state and federal courts starting in 2005, alleging that he lost $15 million in a Florida-based Ponzi scheme. In legal documents, Melgen's attorneys said that he was among a group of affluent investors who lost a total of more than $190 million routed through fraudulent hedge funds. Melgen has sued a brokerage and several other defendants, including Bank of America, alleging breach of fiduciary duty, fraud, negligence and other offenses.

But judges have repeatedly dismissed the lawsuits, most recently in 2010 when a U.S. appellate court ruled against Melgen. He tried again last July, filing a new case against Bank of America.

The Senate Majority Leader, Harry Reid of Nevada, urged Menendez to stop publicly discussing his business relationship with Melgen, a Florida ophthalmologist and entrepreneur. Reid cited a pending inquiry into the matter by the Senate Ethics Committee but praised Menendez as an invaluable leader.

"We all have these issues come to us," Reid said. "We have to work our way through it ... I would suggest to my friend that he shouldn't get into this today."

Menendez has acknowledged that he flew on Melgen's private plane and failed, initially, to properly pay for the trips. He told reporters he reimbursed some $58,500 from his personal funds.

The events have engulfed Menendez, 59, just as he assumed the chairmanship of the Senate Foreign Relations Committee, succeeding former Sen. John Kerry, D-Mass., who resigned last week to become secretary of state.

Melgen has been a friend and political supporter of Menendez's for many years. Last year, Melgen's practice gave $700,000 to Majority PAC, a super political action committee set up to fund Democratic candidates for Senate. Aided by Melgen's donation, the super PAC became the largest outside political committee contributing to Menendez's re-election, spending more than $582,000 on the senator's behalf.